01-17-2019: June Gold: Gentle Rally Stalls

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Point & Figure

Internal Progrm
Third System

Historic Range

Random Chart
Calendar Spread

Level Table
Other Factors

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The possibility of a protracted bear market after such a long runnup in over-valued bull market stocks attracts some investors to gold. But the influence of "commercials" (big banks) is on the short side, hedging their bets while increasingly acquiring gold reserves. Some banks are very cautious about making any predictions for gold and some say that silver is a better bet based upon the historic gold/silver ratio, in which we place little stock. Still, a recent gold rally appears now to be stalled. Whatever climb gold will make from here is seen by many analysts to be labored at best, even through a formerly booming global economy now appears to be weakening. Fears of a stock market crash linger on but are fading. Major sentiment of investors, despite world crises such as the Brexit mess in England and a President in the U.S. who doesn't appear to know what he is doing when it comes to foreign affairs and trade "deals" (now being revealed that he may not even have written "The Art of the Deal" by himself... not being much of "avid reader," stays on the side of a "bullish" market at this time. The smart money hedges its best, but the market seems to recover slowly maintaining lofty heights until "the last bull is in."

Unlike for silver, our technical indicators favor the sell side of gold even though it is rare that we go against the "other factors" at the end of this article. "Other factors" may have to compete with "smart money" where central banks play a much more important role. They are acquiring, but are also hedging their bets. They see a current rally as a "sprint," not a "marathon."

Intermarket Analysis

We fed Gold, Silver, and Platinum into a neural network to get the following result: (Gold and silver have not worked well by themselves in neural networks because of few aggressive trading opportunities.)

Parabolic Chart

June Gold:

Parabolic Chart

Nirvana Chart

June Gold:

Initial Chart

News Analysis

The gold market appears to be losing momentum. It may have hit resistance at the $1,300 level. South African gold output declined by around 14% both on a month to month and a year to year basis in November. Dollar strength is weakening gold prices. Trade data for Europe and Asia doesn't look too healthy. There has been a buyout in the gold mining sector. which favors gold prices. Newmont Mining, the world's #2 producer acquired Goldcorp, the world's #4 producer. The combined annual output of both companies is between 7 and 8 million ounces. The merger might result in lowering that output by 1 million ounces. A U.S./Chinese trade deal could weaken gold prices. Most analysts are looking for a significant decline in U.S. equities to provide more strength for gold. Strong physical demand from China and India and strengthening central bank purchases of gold will help 2019 projections. They would need to see a weakening in the U.S. Dollar as well to have much significance.

Higher world stock markets and upbeat investor moods have weakened gold prices. A strengthening U.S. Dollar is also hurting gold. China's central bank said it will act to stimulate the world's second-largest economy with tax cuts and more credit available to smaller companies and infrastructure spending. This follows very weak import and export data recently reported by China.

Germany, the work horse of the European Union, showed weak economic numbers dampening enthusiasm in Europe. Germany's GDP was up 1.5% in 2018 versus 2.2% in 2017. China is now Germany's biggest trading partner. The U.S. Producer Price Index was considered an aid to gold prices.

The Brexit situatioin in Europe is in turmoil. Europeans seek safe-haven assets such as gold in the wake of the uncertainty there. The British Prime Minister's proposal upon which she had been working for two years was rejected by a large majority, including members of her own party. An impass seems to be resulting from some wanting another nationwide vote on Brexit versus those who don't, and attempts to unseat the Prime Minister. There are 77 days to go as of this writing until Brexit as it now stands takes full effect.

Wells Fargo said it would turn negative on gold if it tops $1,350 an ounce. Wells considers the gold rally a sprint, not a marathon. Wells sees fear of another stock market crash in this country doing a fade over time.

In the last quarter, oil prices dropped 40%, the S&P 500 Index dropped 14%, and the Bloomberg Commodity Index dropped 10%, making the quarter a rough one for investors. Any continuance of that will benefit gold.

Investors continue to prefer gold over silver. Its higher trading volumes offer less volatility.

One of the world's biggest gold fund managers believes exploding U.S. debt will eventually prolong a bear equity market, weaken the U.S. Dollar, and leave gold as the only realistic possibilitiy for investors. The magnitude of the U.S. debt relative to its GDP now stands at 105.7%, a level at which there is significant risk that it will begin to outgrow the GDP. A recession could drive that pace further by an additioinal 5%. It is now costing the U.S. economy 0.1% per week in GDP growth according to White House sources. This manager believes we stand at the cusp of a prolonged bear market equal in time to the recent prolonged bull market.

A recent tight range in gold prices appears as a pause as the UK gets over a recent failed key Brexit vote, while the U.S. government shutdown is beginninng to hit U.S. GDP growth. A new socialist government in Britain would need to impose limits on the movement of money by investors.

Turkey and Venezuela's autocratic leaders got together recently at a gold refinery in Ankara. Turkey imported $900 millioin in gold over the first nine months of 2018.

Italy is having success in selling new government bonds at lower interest rates after reaching an agreement with the European Union on its 2019 budget deficit plans.

Four separate senior officials at the U.S. Federal Reserve have all said the U.S. central bank will now be "patient" before raising interest rates further in 2019. This echoed a message last week by Federal Reserve Chairman Jerome Powell. Inflation is not showing any sign of heading above the Fed's target pace of 2%.

Point & Figure Chart

149.0|                                                                  T  1/14
     | CMX - Jun-19 Gold, 100 troy oz., $/oz.      Cm.=0.00  Lim.= 0.9
     |                             X
     |                           X XOX
     |                           XOXOXOX
     |                           XOXOXOXOX
     |                           XO O OXOXOXO      XOXOXOXO
     |                         X X    O O OXO      XOXOXOXO
     |                       X XOX        OXO      XOXOXOXO
     |                       XOXOX        OXO      XOXO O O
     |               XOXOX X XOXOX        OXO  X X XOX    O
     |               XOXOXOXOXOXO         OXO  XOXOXOX    O
     |             X XO OXOXOXOX          O O  XOXOXOX    O
     |             XOX  O OXO OX            OX XOXOXOX    O  X
     |   X         XOX    O   OX            OXOXOXOXO     O  X
     |OX XO        XOX        O             OXOXO OX      O  X
     |OXOXO        XO                       OXOX  OX      O  X
     |OXOXO        X                        OXO   O       OX X
     |  O O    XO  X                        OX            OXOX
     |    OX   XO  X                        OX            OXO
     |    OXO  XO  X                        OX            OX
     |    OXOX XO  X                        OX            OX
     |    OXOXOXO  X                        O
     |    OXOXO O  X
     |    OXO   OX X
     |    OX    OXOX
     |    O     OXO
     |          OX
     |          OX
     |          O
               111                        111        1      11
The above chart is giving a conventional buy signal.

Cyclical and Seasonal Factors

We are headed toward a cyclical low and a seasonal up period.

Cyclicals Cyclicals Seasonals

Internal Program

Our best-performing internal program is "Pattern". It is giving a sell signal.

Internal Printout 1 Internal Printout 2

Results of "Pattern" for Gold (blue lines = successful trades, red, unsuccessful): (Always in the market.)


Third System Confirmation

Our third system has triggered a sell signal. (Note, disregard the year on the chart. Our regular readers know this is not a Y2K-compliant system, but it still works.)

Third System


The point value is $100. Initial margin on a single contract is $3,740. Use of options is advised.

Historic Range

Scale trade sellers are entering the market for the long term in this price range.

Historical Chart

Commitment of Traders

Trump, McConnell, and their Republican gang of yes-men and (some, but not all) women economy-wreckers have shut down the CFTC and their Traders Commitment Data as of 12/18. Our data from them is stale, just like they are. Hopefully, the Democrats will find a way to work around those stinking bozoes to get our Government open again. The problem is that they think it is their government and it belongs to them, not to Americans as a whole. It is their own private slush fund while the rich get richer and the poor get poorer. How stupid can voters get?

Commitment 1

In the chart below, the yellow line is the futures price, read on the right axis. All other colors are read on the left axis. Blue is small speculators. Red is large speculators. Green is commercials. Commercials with the best track record are remaining short.

Commitment 2

Interpretation of a Different Site Below (Their trader categories vary from ours):

Commitment 3

Volatility / Probable Range

FB 1 FB 2

The average volatility shown below suggests that a change in major trend to down is imminent near a volatility low point.

Range/Volatilitiy Chart

Possible Future Prices

Random Chart

Option Recommendation

Our option trade recommendation is to Buy (1) Gold August 1310 Call and Sell (1) Gold June 1290 Call @ 2.4 to the sell side or greater.

o 1 o 2 o 5

o 3

o 4

Calendar Spread

What the Jun. - Dec. calendar spread suggests to us is that buying the near contract and selling the far one is at most times not profitable, which we think is a sign that these futures may go down in the long run. The best time to enter or leave the above spread is when it is at -17.50 or narrower buying the far as prices are rising and then selling the near, and exiting or entering when it is at -20.00 or wider selling the far as prices are falling and then buying the near. At this time, we appear to be midway headed toward the sell the far, buy the near point.

Level Table:

Level Table

The path of least resistance is up.
1420 |                                                                 R  1/15
 CMX - Jun-19 Gold, 100 troy oz., $/oz.      Cm.=0.00  Lim.= 0.9
1400 |_________________________________________________________________________
1380 |AAAAAABBBBCEEEEFFFFGGGG__________________________________________________
1360 |BBBBBCCCDDDDDDDDEEEEFFFFGGG______________________________________________
1340 |CEHHHHHHHHHJ_____________________________________________________________
1320 |JJJJJJJKKKL______________________________________________________________
1300 |LLZZZZZZZZ[[_____________________________________________________________
     |LLLMZZZZZZ   <<<
     |LMMMZZZZZZ                                                                                                                                                                                                                   2
1280 |MMMMMMMNNYYY_____________________________________________________________
1260 |NUXXXXYYYYY______________________________________________________________
1240 |NNOOOOOPTTTUUUUUVVVVWWWWWWWXX____________________________________________
1220 |PQQQQQQRRRRRRRSSSSSSSTTTTTVW_____________________________________________
1200 |PPPSST___________________________________________________________________
1180 |-A-B-C-D-E-F-G-H-J-K-L-M-N-O-P-Q-R-S-T-U-V-W-X-Y-Z----|----|-- TPO= 0.323
                                           1 1 1 1 1 1 1              
       1 2 2 3 3 4 4 4 5 5 6 6 7 7 8 8 9 9 0 0 0 1 1 2 2 1           1
       1 0 1 0 1 0 1 3 1 2 1 2 1 2 0 2 0 1 0 1 3 1 2 1 2 1           1
       9 1 5 2 6 2 6 0 4 8 1 5 0 4 7 1 5 9 3 7 1 4 9 3 8 4           5

Other Factors

Multiple Chart Indicators Summary
Multiple Chart Indicators Summary

Here's an intraday chart for a previous day ( 1/14 ).

Intraday Chart

                 Risk Versus Opportunity Report

                     GCM9    June Gold

                      High Price:  1321
                   Current Price:  1301
                       Low Price:  1261

                            Risk: -0.031
                     Opportunity: -0.062

                    (O/R) Ratio =  2.000

Overall Recommendation

Decision Weighting Factors
FactorsWeighted Points
Inter-Market Analysis - 1
Parabolic Chart + 1
Nirvana Chart - 1
News + 1
Point & Figure + 1
Cyclicals - 1
Seasonals + 1
Internal System 1 - 1
Internal System 2 0
Third System - 1
Historic Range - 1
Commitment of Traders - 1
Range/Volatility - 1
Level Table + 1
Other Factors + 1
Total - 2
Place 4 June Gold on aSell Watch with stoploss @+ 7.98 above the get-in point when recent price is represented as "130.13".